TEXT-Fitch places Thailand's Finansa on rating watch negative

(The following statement was released by the rating agency)

Oct 10 - Fitch Ratings (Thailand) Limited has placed Finansa Public Company Limited's (FNS) National Long- and Short-term Ratings of 'BBB-(tha)' and 'F3(tha)', respectively, on Rating Watch Negative (RWN).

The RWN reflects further deterioration in FNS's financial performance and liquidity profile during H112 as well as its continued weak leverage profile. These factors are increasing risks to the company's already weak and volatile business prospects, extended poor performance and reliance on short-term funding. However, Fitch believes that FNS may consider a capital and liquidity enhancement plan in the near- term which, if successful, would lower the company's liquidity risk and improve its leverage profile.

For H112, FNS reported unconsolidated net loss of THB31.8m and consolidated net loss of THB74.5m. Although expected large advisory fees generated by its investment banking subsidiary, Finansa Securities Limited, should improve H212 performance, income from this segment is dependent on market conditions and M&A activities, which are volatile and subject to key person risk. Fitch also does not expect FNS's other businesses to provide meaningful contribution to the group over the next one to two years.

FNS's liquidity risk remains high given its reliance on short-term borrowing and declining high-quality liquid assets. However, this risk is partly alleviated by FNS's committed back-up credit facility of THB250m with a Thai bank. FNS's double leverage remains high, partly due to support provided to various subsidiaries to meet their regulatory capital requirements.

Fitch expects to resolve the RWN in three to six months following a review of end-2012 financials and implementation of a capital and liquidity enhancement plan.

A failure to implement the capital and liquidity enhancement plan could result in rating downgrade. Conversely, a successful implementation plus a stabilisation of its core business and funding profile leading to a material improvement in the company's leverage and liquidity profile may result in the ratings being affirmed.